Downtown Minneapolis businesses will be assessed to come up with the required $25 million private contribution toward the $50 million Nicollet Mall overhaul. The Minneapolis Downtown Council and Greater Minneapolis Building Owners & Managers Association are in the process of discussing the best way to divvy up assessments. (Staff photo: Bill Klotz)

Downtown Council details Nicollet Mall assessment timeline

Stairways to allow access to the Nicollet Mall from skyways are among the features of a redesigned Nicolette Mall, a project that is estimated to cut $50 million. (Submitted rendering)

Properties that aren’t right by Nicollet Mall will likely be assessed to help Minneapolis come up with the required $25 million private contribution toward the $50 million overhaul planned for the street, according to a plan sketched out at a Minneapolis Regional Chamber of Commerce event Friday morning.

Minneapolis has an existing assessment formula that it uses for more run-of-the-mill projects, but that process would only generate between $1 million and $1.5 million, Cramer said in an interview. As a result, BOMA and the Downtown Council are talking with a range of property owners and managers to come up with a way to assess for the rest of the money.

“Nobody likes to pay taxes, obviously, but it is part of the finance plan, and the method that we’re using to assess is really premised on proving a benefit to property,” Cramer told the audience.

Assessments can’t be more costly than the benefit that the assessed properties see from the improvement or they’re considered an unfair taking under the Minnesota Constitution and the 14th Amendment of the U.S. Constitution.

Cramer said in an interview that he’s not worried about the $25 million price tag exceeding the increase in property values from the upgraded mall. A $15,000 study the city commissioned estimated that blocks facing the mall and immediately adjacent would see property values climb $57 million over an unspecified period.

The city has retained Minneapolis-based Shenehon Co. as an appraiser at the urging of the Downtown Council and BOMA, Cramer said in his speech.

Discussions on the details of the process are still in their early stages, but two main factors would affect assessment rates under the framework currently envisioned, Cramer told Finance and Commerce. The first is a property’s distance from Nicollet Mall. Rates would taper off the farther a property is from the project. It’s not yet known how big of an area will be assessed, but the assessment area will go beyond the parcels along Nicollet.

Assessments would also be adjusted according to whether the property is commercial, residential or a nonprofit since different types of properties will see different benefits from the project, he said.

After Labor Day, BOMA and the Downtown Council expect to begin discussing the “architecture of the assessment plan,” how big the assessment area will be and the principles upon which those assessments will be based, Cramer said. They’ll share actual proposed assessments later in the year, before the city’s formal public process launches.

“Prior to that happening, the business community wants to reach out to the business community to talk very openly and transparently about both the project and its benefits and how the private part of that finance plan will work and what the effects on individual properties will be,” he told the audience.

Assessments covered most the costs of the two other big Nicollet Mall overhauls in 1968 and 1991. This time, though, assessments will make up just half the project costs. The rest of the project will be funded through $21.5 million in bonding money the Legislature set aside this year and $3.5 million that Mayor Betsy Hodges is proposing for Minneapolis to set aside in 2015.

Todd Klingel, president and CEO of the Minneapolis chamber, said the state and city contributions make this a bargain for downtown property owners.

“You paid $25 million almost 20 years ago and you have the current mall. Now you’re not having to have any kind of inflation and you have this beautiful new mall,” he said.

BOMA Executive Director Kevin Lewis acknowledged the outside contributions but added that downtown property owners now contribute to the Downtown Improvement District, a nonprofit that supports the downtown and wasn’t around at the time of the earlier projects. The 120-block district, which Cramer also heads, is largely funded by charges to commercial properties collected through special assessments.

Ultimately, the Nicollet Mall assessments will be paid for by the tenants in the buildings, Lewis said.

Still, he thinks the process will demonstrate the project’s benefits and that those benefits extend beyond “one singular street” to help the downtown as a whole. BOMA plans to gather input from those affected and create an equitable way to share the costs.

“I would say that many have enough civic pride that they understand the importance of the issue,” Lewis said. “But they also have balance sheets to manage.”